Russia’s Going Premium And Going Overseas

Nikita Sherman marked out a reputation for himself as someone who can get digital content to pay when he was in charge of Odnoklassniki.ru, the Russian Facebook-inspired site that is now one of the most popular social media destinations in the country, with 45 million users.

In contrast to, well, Facebook itself, activity on the site is fee based. You want to set up an account? You pay. Upload more than 100 photos? You pay again. Appear offline or delete comments? Pay one more time.

Now ambitious Russian investors like those behind Odnoklassniki.ru are taking this expertise overseas — DST, the majority shareholder of Odnoklassniki, took a $200 million stake in Facebook last May, and Alexander Lebedev, who bought the London Evening Standard in January 2009, is in talks to acquire London’s Indepdent newspaper, having already bought London Evening Standard.

Expect plenty more, says Sherman. “The Russian market is still too small,” Sherman says, perhaps surprisingly for a population of 116 million adults where 42 million of them are internet users, a rise of 22 percent on the year before, according to figures from the Public Opinion Foundation. “This is why they go abroad and buy into companies like Facebook.”

Sherman, no longer at Odnoklassniki.ru, hopes his pay trick will work again in another rapidly growing area – he’s now CEO of Drimmi, a new gaming startup that’s still in stealth mode and this week raised “several million” dollars from VCs including Mangrove and ABRT.

Micropayment social gamers Playfish (sold to EA for $275 million) and Zynga (which raised $180 million, also from DST, last December) are generating big buzz in the West – but, with Odnoklassniki.ru, Sherman has already proved Russians are ready and willing to pay for online interaction. So, what’s next… ?

— “It’s about social networks,” Sherman says. “They have very big prospects in Russia. They still need to monetise more though.” Facebook is just starting to gear up in markets like Russia but the market is still largely dominated by local players like Odnoklassnik.ru. This site expects to “open” membership beyond school affiliations in the same way that Facebook did in2006 – that could mean vastly more micropaying customers. “When it opens up later this year, it will be huge,” Sherman says.”

— Global social gaming ambition? “First we want to gain position in Russia,” Sherman says of Drimmi. “Then we would like to do more in international markets. It’s cheaper to make mistakes here first.”

— Russian investors may be increasingly active overseas, but Western players are finding it harder in Russia. “It’s a complicated and very local market. To do business here is not that easy,” said Sherman. He cites not just the language and legal hurdles, but the culture as well. Google’s agreed purchase of Rambler’s Begun contextual ad network was blocked by Russia’s antitrust authorities. And Rupert Murdoch reportedly is looking to sell off media assets in the country. Murdoch has in the past said: “The more I read about investments in Russia, the less I like the feel of it.”

— The difference between Russian and Western investors: “Big western investors are more conservative to go in with the kind of money that Russian investors go in with, in the kinds of investments Russian businesspeople are willing to make.”